What constitutes a 'Competitive Business' in relation to restrictions on activities after leaving a Noodles & Company franchise?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
"Competitive Business" – Any business that operates or franchises one or more restaurants: (1) whose sales of Specified Dishes (as defined below) collectively constitute more than 10% of restaurant operating revenues; (2) that are the same as, or substantially similar to, the Noodles & Company concept as it evolves or changes over time; or (3) that operate in a fast casual or quick casual format. As used in this Agreement, "Specified Dishes" means noodle dishes, pasta dishes, Asian dishes, Italian or Mediterranean dishes and any other dishes that are the same or substantially similar to the dishes on the Noodles & Company menu ("Noodles & Company Dishes") as it may evolve or change over time. Restrictions in this Agreement on competitive activities do not apply to: (a) the ownership or operation of other Noodles & Company restaurants we or our Affiliates license; (b) the ownership of shares of a class of securities that are listed on a public stock exchange or traded on the over-the-counter market and that represent less than 5% of that class of securities; or (c) any restaurant concept whose per person average check during the preceding 12 months was more than 50% higher or lower than Noodles & Company per person average check for the same period. Revenue of a restaurant, as used in this definition means the aggregate amount of all sales of food, beverages and other products sold in or by such restaurant, whether for cash or credit, but excluding all federal, state or municipal sales or service taxes collected from customers and paid to the appropriate taxing authorities, all coupons, promotions, discounts and refunds.
Source: Item 23 — RECEIPT (FDD pages 99–350)
What This Means (2025 FDD)
According to Noodles & Company's 2025 Franchise Disclosure Document, a 'Competitive Business' is defined in relation to post-term non-compete restrictions. Specifically, a 'Competitive Business' is any business that operates or franchises one or more restaurants that meet any of the following criteria: (1) whose sales of specified dishes collectively constitute more than 10% of restaurant operating revenues; (2) that are the same as, or substantially similar to, the Noodles & Company concept as it evolves or changes over time; or (3) that operate in a fast casual or quick casual format.
'Specified Dishes' are defined as noodle dishes, pasta dishes, Asian dishes, Italian or Mediterranean dishes, and any other dishes that are the same or substantially similar to the dishes on the Noodles & Company menu as it may evolve or change over time. This definition is crucial because it determines the scope of activities a former franchisee is restricted from pursuing after leaving the Noodles & Company system.
However, the restrictions on competitive activities do not apply to: (a) the ownership or operation of other Noodles & Company restaurants that Noodles & Company or its affiliates license; (b) the ownership of shares of a class of securities that are listed on a public stock exchange or traded on the over-the-counter market and that represent less than 5% of that class of securities; or (c) any restaurant concept whose per-person average check during the preceding 12 months was more than 50% higher or lower than Noodles & Company's per-person average check for the same period. Revenue of a restaurant, as used in this definition, means the aggregate amount of all sales of food, beverages, and other products sold in or by such restaurant, whether for cash or credit, but excluding all federal, state, or municipal sales or service taxes collected from customers and paid to the appropriate taxing authorities, all coupons, promotions, discounts, and refunds. This means a former franchisee could invest in a publicly traded competitor, as long as the stake is less than 5%, or operate a restaurant with a significantly different average check size without violating the non-compete agreement.